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General Mills Inc GIS

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Another Solid Quarter for Narrow-Moat General Mills, but Shares Appear Fully Valued

Analyst Note

| Rebecca Scheuneman, CFA |

Narrow-moat General Mills realized 4% organic sales growth in its fiscal 2021, in line with its two-year average normalizing the pandemic, which beat our 3% estimate. Its annual adjusted operating margin increased 10 basis points to 17.4%, in line with our forecast, as lower administrative expenses more than offset cost inflation. We do not plan to alter our $59 fair value estimate materially, as the top line beat and a bump in long-term pet food sales (given the high-single-digit increase in pet adoptions during the pandemic) should be offset by an assumed higher U.S. tax rate in fiscal 2023 and beyond. As shares appearing fully valued, we suggest investors consider wide-moat Kellogg instead.

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Company Profile

Business Description

General Mills is a leading global packaged food company that produces snacks, cereal, convenient meals, yogurt, dough, baking mixes and ingredients, pet food, and superpremium ice cream. Its largest brands are Nature Valley, Cheerios, Old El Paso, Yoplait, Pillsbury, Betty Crocker, BLUE, and Haagen-Dazs. In fiscal 2021, 75% of its revenue was derived from the United States, although the company also operates in Canada, Europe, Australia, Asia, and Latin America. While most of General Mills' products are sold through retail stores to consumers, the company also sells products into the food-service channel and the commercial baking industry.

Contact
Number One General Mills Boulevard
Minneapolis, MN, 55426
T +1 763 764-7600
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings May 31, 2021
Fiscal Year End May 29, 2022
Stock Type High Yield
Employees 35,000

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